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Section 89, Civil Procedure Code, 1908: A Critical Analysis

The 1990s brought liberalization to India, and with it came a docket explosion crisis, the ramifications of which we are still dealing with. S. 89 was inserted in the Code of Civil Procedure through its 1999 Amendment Act,^[1] based on the recommendations of the Malimath Committee report and the 129thLaw Commission Report, in response to this crisis. The aim was to increase access to justice through reducing costs and pendency.^[2] A specific provision was required as litigantsdid not refer to these much when left to their own devices due to reasons such as ignorance, reluctance or indifference.^[3]

In light of the above, S. 89, CPC enables courts to determine whether a matter can be resolved through ADR. It provides for reference to arbitration, conciliation, judicial settlement (may also be brought about through a Lok Adalat) and mediation. Eliciting parties' consent on the method of dispute resolution to be adopted is preferred but not necessary.^[4]

The effect of referring a dispute to each of these methods is different. For example, a case can only be referred to arbitration if both parties consent to it. Once it is so referred, it goes "outside the stream of the court"^[5] and is decided finally by the arbitral tribunal itself, based on the provisions of the Arbitration and Conciliation Act, 1996 ["AC Act"].^[6] On the other hand, a mediation settlement will have to be confirmed by the court. While the scheme of the section is fairly simple prima facie, lacunae in drafting have created some complications.^[7]

Deliberation on Section 89, CPC was initiated in Salem Advocate Bar Association v. Union of India, 2003 (1) SCC 49.. The constitutional validity of the section was upheld and the intent behind its inclusion lauded. Criticism was muted as S. 89, CPC was a recent insertion at the time. It was opined that the section had not been very effective as its modalities were yet to be determined. A committee was set up to draft model rules, and the apex court recommended the adoption of these rules by the various High Courts so as to give effect to section 89(2)(d), CPC.

In the subsequent decision of Salem Advocate Bar Association v. Union of India, 2005 (6) SCC 344, ["Salem II"] the apex court purposively reinterpreted S. 89, CPC to reduce anomalies. For instance, the words shall and may in S. 89, CPC and Rules IA-IC, Order X, CPC were read harmoniously and it was determined that may was intended to refer to only the reformulation of terms of a potential settlement by the court. There was also an attempt to resolve the issue created by inclusion of the phrase "terms of settlement" in the section. The section mandates formulation of settlement at the pleadings stages. However, this is not feasible since, firstly, there would not have been adequate application of mind of the judge at the pleadings stage, and, secondly, determining terms of settlement is the domain of the ADR forum. So, a plain reading of the section creates the futile situation wherein courts are expected to do the ADR forums job before referring a matter to it. In light of the above, "terms of settlement" was interpreted as summary of disputes.

The court further replaced the definition of mediation in the section with that suggested in the model mediation rules.

The subsequent decision in Afcons Infrastructure Ltd v. Cherian Varkey Construction Co (P) Ltd , 2010 8 SCC 24, ["Afcons case"]. is the most recent landmark judgement on the issue. The primary issue herein was whether the court could refer a case to arbitration without the consent of both parties. However, there was also an extensive discussion on the scope of S. 89, CPC. It was noted that the language of S. 89(1), CPC is borrowed entirely from S. 73(1), AC Act which is in reference to a conciliator in the final stages of conciliation and hence unsuitable vis-a-vis a court of law referring disputes to be resolved through an ADR method. Thus, the phrase "terms of settlement" was interpreted in light of the decision in Salem II.

The mix-up between the terms judicial settlement and mediation in sub clauses (c) and (d) of S. 89(2) CPC was recognized as a drafting error. It was also opined that a matter referred to a Lok Adalat under section 89 would be different from a matter taken to a Lok Adalat independently as the former would still need to be placed before the court subsequent to the Lok Adalat passing its award. However, this aspect of the judgment has been subsequently disputed due to the fact that it is in conflict with section 21, LSA Act.^{[8] [9]}

Beyond Supreme Court judgments, further confusion exists section 89(2)(c) and 89(2)(d) even if the words mediation and judicial settlement are switched as in that case, a mediation agreement will get the same status as one reached through a Lok Adalat. However, as per S. 21, Legal Services Authorities Act, 1987 ["LSA Act"], an award passed by a Lok Adalat is given the same status as a decree passed by a civil court, while a mediation agreement has to be confirmed by court.^[10]" Another strand of opposition exists in the form of those who opine that the distinction between mediation and conciliation is a false one and hence there is no need for a separate mediation clause.^[11]" The Law Commission of India has even recommended the deletion of the provision for mediation under section 89(1) because that is an option that is always open to the court anyway, leaving no need or reason to codify it.^[12]"

The issue vis-a-vis court fees which has arisen in light of S. 16, Court Fees Act, 1870^[13] must also be resolved. The intent behind the section is to avoid penalizing litigants who choose ADR, and also incentivizing them, by ensuring a refund of court fees. However, a plain reading of the section itself gives rise to a problem. Section 89, CPC is supposed to be a mandatory provision if the court feels that there is a chance of settlement. So, cases are referred for ADR mandatorily. That does not always translate into a settlement taking place between the parties. If such a thing happens in case of mediation, conciliation or Lok Adalats, then parties can come back to court. Nonetheless, in this case, they would have been refunded their court fee so they would have their case tried for free.^[14] In Nutan Batra v. Buniyaad Associates, 2018 SCC Online Del 12916., the Delhi High Court clarified that S. 16, Court Fees Act must not be given a literal interpretation which would entitle a plaintiff to refund irrespective of successful settlement through ADR methods.

Despite the above criticisms, it cannot be denied that S. 89, CPC is an admirable attempt to reduce the burden on courts^[15] and make justice a reality for litigants. The model that it attempts to replicate has been very successful in various jurisdictions. California is a very successful example of this with no arrears of cases older than two years. In fact, in San Diego, 97% of all civil cases are settled through methods of ADR.^[16] Further, the section has facilitated the increased use of ADR methods by parties to legal disputes. For instance, there is an increased trend of mediation in matrimonial disputes. Such avenues are also being preferred by parties who prefer confidentiality.^[17] Further, implementation has become more practicable in light of the apex courts interpretation of the section, thus ensuring an overall positive impact. In brief, section 89 is an attempt at innovative legislation to solve a problem that is plaguing the Indian legal system and is only set to become bigger in the coming years. One can then safely surmise that the idea behind section 89, CPC is one that is not only laudable it is also desperately needed.

[1] Rules 1A-1C, CPC And Section 16, Court Fees Act, 1870 ["Court Fees Act"] were incorporated along with Section 89 and are intended to be read together; MULLA ON THE CODE OF CIVIL PROCEDURE, Vol 1, 874, (BM Prasad ed., 18th edn., 2011).

[2] MP Jain, THE CIVIL PROCEDURE CODE, 251, (2004).

[3] R.V. Raveendran, Section 89 CPC: Need For An Urgent Relook, SCC(J) 2007 (4) 23, 23.

[4] 238th Report of the Law Commission of India, Amendment of Section 89 of the Code of Civil Procedure, 1908 and Allied Provisions, 10, 2011.

[5] Para 9, Salem Advocate Bar Association v. Union of India, 2003 (1) SCC 49.

[6] 176th Report of the Law Commission of India, The Arbitration and Conciliation (Amendment) Bill, 2001, 32, 2001.

[7] It has been described as "not very happily worded" and having been "drafted in a hurry"; supra note 3, at 24.

[8] Supra note 4, at 19.

[9] The section provides that a Lok Adalats award will be deemed to be the decree of a civil court.

[10] Supra note 4, at 19.

[11] Supra note 3, at 23.

[12] 163rd Report of the Law Commission of India, The Code of Civil Procedure (Amendment) Bill, 1997, 21, 1998. However, there have not been too many takers for this particular point of view.

[13] This section is not in effect in all states as many of them have their own Court Fees Act. A lot of these state acts do not have a corresponding provision; supra note 3, at 30.]

[14] Supra note 3, at 24.

[15] A Xavier, Mediation: Its Origin and Growth in India, 27(2), HAMLINE JOURNAL OF PUBLIC LAW & POLICY, 275, 281, (2006).

[16] Justice MS Shah, Study of the American Legal System for Procedural Reforms in Civil Courts in India, available at http://gujarathighcourt.nic.in/mediation/study1.htm.

[17] BS Hanasi, A Critical Study of the Alternate Dispute Resolution System in India (with special focus on Lok Adalats), 222, 2008.

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